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Diversity not cacophony

Kit Bingham on why board diversity needs to reflect much more than just gender equality

20 Oct 2014

The business case for enhanced boardroom diversity is well and truly won. In a global age, few continue to assert that boards should only be made up solely of a given market’s business elite, typically males (in the West, usually white), nearing retirement age and with a solid business career behind them.

But board diversity continues to be viewed in restricted terms, often through the prism of gender. True diversity requires boards to consider a wide range of additional qualities.

Increasing the number of women on boards is a vital goal – because of historic under-representation, to provide different perspectives and because women account for an increasing proportion of the global workforce and customer base.

Many markets, notably in Europe, have taken steps either to mandate higher numbers of women on boards via quotas (Norway) or via encouragement, persuasion and by naming and shaming laggards.

Good progress has been made. In the UK, for example, there is no longer a single FTSE 100 company with an all-male board, while the proportion of women on boards across the index has risen from about 12 per cent to nearer 20 per cent since 2010. Plenty of work remains but the trend is encouraging.

There is a further reason why gender tends to dominate the diversity debate – it is easy to measure. Totting up the number of women on boards offers few shades of grey, making it easy for regulators and the media to highlight progress, or lack of it. The age of board members (assuming it is disclosed) is also an empirical fact, which is why I suspect that the call for greater age diversity on boards will start to grow. Ditto, nationality.

At its heart, however, diversity is about factors that are harder to measure. Gender, age and ethnicity are useful proxies for diversity, but they don’t definitively capture whether a prospective director will bring independent thought, challenge and perspectives to the boardroom table. An individual’s functional expertise and experience are likely to be highly relevant considerations, though harder to discern. For example, a board may be well balanced in terms of age, gender and ethnicity, but if all its members are all former Big Four audit partners, or Chief Executives, or have spent their careers in the same handful of markets, their attitudes and approach to problem solving will offer little diversity.

Bringing a wider range of functional expertise into boardrooms beyond the typical pools of general management, sales and marketing or finance thus becomes an important consideration. Likewise, an empathy for different business cultures, gained by living and working in varied parts of the world and not merely passing through, will become an important element of a director’s bio.

The final piece of the puzzle is a great Chair. If a board of independent-minded individuals with a range of perspectives and experiences is the key to good decision-making, then a strong and wise Chair is required to join the threads together. Board diversity is a positive attribute; board cacophony is not.